On 7 December 2011, The Government announced that the proposed date for introducing the Statutory Residence Test had been delayed by a further twelve months. As a result, the uncertainty which pervades the existing residence rules is set to continue. Anyone therefore, wishing to arrange their affairs to become UK or non-UK resident, should take professional advice as soon as possible.

The Government had previously consulted on the proposed residence test, but now wishes to undertake further consultation. In the meantime it had published quite well-defined rules which although seen by many to be ‘pro H M Revenue & Customs (HMRC)’ in their approach, at least would have provided greater certainty, and these proposals had received a qualified welcome. In the meantime, the Chartered Institute of Taxation, which has welcomed the delay of a further twelve months to allow further consultation, has suggested that there may be advantages for taxpayers to opt-into the rules that were intended to apply from 6 April 2012 until the eventual changes in the law, which will form part of the 2013 Finance Bill, are known. We have had a long wait for a statutory residence test, and in the meantime the Courts have decided tax residence on the basis of cases which date back to 1875, the circumstances of which bear little relevance to modern society.

At the time of going to press, it is not known if the ability to opt-in to those rules which were widely thought would come into effect from 6 April 2012 will be adopted by the Government. If it is not, then taxpayers will be faced with a potentially difficult environment, in the wake of what for them was a significant victory in the case of Gaines-Cooper, in which an individual who sought to establish that he was non-UK resident for tax purposes, in circumstances which were close to the margin of the rules as then set out in HMRC’s official document on residence (IR 20 – since withdrawn and replaced by HMRC 6) was adjudged by the Supreme Court never to have lost his UK residence status.

And in the meantime?

The residence rules are likely to based upon a mixture of very limited statutory rules, guidance notes published by HMRC in their booklet HMRC 6 (the text of which has already been changed in some important areas) and such guidance as can be taken from previous cases that have been decided by the Courts. All in all, this leaves the taxpayer with a difficult and confusing path to follow. In the meantime, HMRC are likely to investigate the circumstances of each case very carefully, and on an individual basis. Perhaps even in marginal cases decisions could be made by HMRC either way, without always being totally consistent.

Some general points can be made, as below, but please remember that the following suggestions do not represent formal advice and must not be acted upon unless full professional advice has also been obtained.

It is generally easier to establish non residence if an individual is leaving the UK for full time employment abroad for a minimum period that will cover at least one complete UK tax year if the intended visits to the UK during the period of that employment are for less than 91 days.
It is better, and is probably essential, to avoid performing any duties relating to the overseas employment whilst visiting the UK.
In counting the days for which an individual is present in the UK, days of arrival are now counted in the total in addition to days that are totally spent in the UK.
If leaving the UK for reasons other than employment, it will be essential to demonstrate that there has been a genuine lifestyle change with minimal continuing connection in the UK, and a new lifestyle in the adoptive country. This is in addition to satisfying the test of spending less than 91 days in the UK as an average over a period of years. In fact we recommend that the average number of days spent in the UK after departure should be substantially less than 91 days if at all possible.
It is possible to be tax resident in two jurisdictions at the same time. In other words, acquiring a tax residence in a foreign country does not automatically cause UK tax residence status to cease. It also goes without saying that acquiring overseas residence in a low tax regime or ‘tax haven’ will almost certainly invite close scrutiny and enquiries from HMRC.
If the Government allows individuals who leave the UK on or after 6 April 2012 but before 6 April 2013 to ‘opt in’ to the rules that were widely expected to apply from 6 April 2012, but which have now been delayed, it may be possible to offer advice that takes into account some of the greater certainties that these rules were expected to introduce.
We therefore recommend, and are very pleased to offer, detailed advice to anyone who may wish to abandon UK residence, or to persons who intend to visit the UK to live or work but who may be uncertain about whether such visits might cause them to become UK tax resident and therefore liable to pay UK taxes.

Please contact Tim Keeley, Gerry Jackson, Pamela Chatterjee or Janice Parker if you would like to arrange a consultation.